Economics Inflation Questions
The impact of inflation on central bank policy is that it influences the decisions made by the central bank regarding interest rates and monetary policy. When inflation is high, central banks tend to increase interest rates to reduce spending and borrowing, which helps to control inflation. Conversely, when inflation is low, central banks may lower interest rates to stimulate spending and borrowing, thereby boosting economic growth. Central banks also use other tools, such as open market operations and reserve requirements, to manage inflation and stabilize the economy.